S&P 500 Closes at Record High, as Precious Metals Pricing Firm Up

The Standard & Poor’s 500 closed at an all-time record high today. After factoring in today’s gains of 14.09 points the index is now fixed at 3019.56. The NASDAQ composite also closed at a new all-time record high. After factoring in today’s gains of 70.10 points, the NASDAQ composite is currently fixed at 8321.50.

These new record highs are coming in tandem with solid performances in the precious metals’ markets. All four metals that make up this group scored respectable gains, with platinum showing the largest percentage gain on the day. Platinum futures gained a total of $19 or 2.21% and are currently fixed at $880.40. Palladium futures came in second in terms of percentage gains today. After factoring in today’s gains of $20.20 equaling 1.33 %, the most active palladium contract is currently fixed at $1538.80.

Silver futures which have shown the greatest percentage gains over the last two months (when compared to the other precious metals in the complex) in trading was up $13.40 which is a net gain of +0.81%, and is currently fixed at $16.61. Lastly gold futures gained +0.25%, which amounts to $3.50. The most active August futures contract is currently fixed at $1425.20.

What is interesting is we have another example of both equities and the precious metals asset groups running in tandem, with respectable gains in the precious metals and all-time record closes in the Standard & Poor’s 500 and NASDAQ composite. Typically, these two asset classes have a reverse or opposite correlation as money moves from one asset class to the other based upon the financial environment. When market participants and investors favor a risk on market environment, they will typically move precious metals pricing lower and equities higher.

However, there are certain market scenarios which will be bullish for both asset classes. Currently the scenario in play driving both equities and the precious metals higher is the assumption that the federal reserve will cut interest rates at the end of this month, and announce these cuts on July 31 when the FOMC meeting concludes.

The largest variable which is unknown by investors is whether or not the Fed will announce a cut of ¼%, or ½ a percent at the end of this month. With just under seven days until the next FOMC meeting begins, the current probability according to the CME’s FedWatch tool is 100% that there will be a rate cut announced at the conclusion of this month’s meeting. The CME tool predicts a 76 ½% probability that the rate cut will be ½ a percent, and a 23 ½% probability that the rate cut will be ¼%.

It is widely acknowledged that a rate cut has been factored into current pricing of both U.S. equities as well as the precious metals complex. One would expect to see a sharp spike if the actual rate cut is above or below these current expectations. A rate cut of ½ a percent would result in the least amount of market volatility, at the same time a rate cut of ¼% would come in under current models and could have bearish implications on both equities as well as precious metals. If the Fed does not cut rates, or have a rate cut above ½ a percent we could see some wild market gyrations at the end of this month. However based on current market assessments this is highly unlikely.

Wishing you as always, good trading,